Video Streaming May Change the Way We View Sports

Most of the major professional athletic leagues have recently tested the waters with a couple of the Big Four technology firms. The NFL partnered with Facebook during its 2014 season, posting highlights of various games on its official Facebook account. The NFL plans to further leverage streaming technology by partnering with the ailing tech giant Yahoo! to live stream the October 25 Buffalo Bills-Jacksonville Jaguars game. While the game will be available on network television in the teams’ respective local markets, the rest of the nation will have to stream the game (for free) through Yahoo.com, Yahoo! Sports, Yahoo! Screen and Tumblr (all proprietary Yahoo! Services). YouTube and the NBA have a long standing relationship, and the league is currently expanding into multiple social media platforms including startup apps like Yo and Pinterest.

So why all the fuss about video streaming? There has been a fierce competition between technology giants like Facebook, Google and their rivals to harness the growth of the mobile internet, and specifically mobile video streaming. There are 2.8 billion internet users, up by 8 percent year to date. Out of those 2.8 billion internet users 2.1 billion use mobile devices to access the web, a 23 percent increase from 2014. Mobile data usage increased 69 percent in 2014, 56 percent of that increase was attributed to mobile video streaming. Many rapidly growing tech titans have partnered or acquired many companies to gain a foothold in this increasingly popular service. A large potential driver of the popularity of streaming services could be the increasing availability of online sporting content.

The goal of these partnerships between professional leagues and social media firms is a mixture of marketing, strategic positioning and a continuing effort to become a global brand. Leveraging social media’s reach with high value, non-user generated content, the NFL, MLB and NBA look to expand their presence in the global consciousness and gain access to fast-growing emerging markets (such as India and China) that have relatively low internet penetration but a young and increasingly wealthy population whose awareness of and access to American sporting events are minimal.

In 2013, Nielsen reported that consumers spend more time on their mobile devices than on their PCs in hours per month. This trend is can be seen in a company like Facebook’s 2013 revenue growth. The advertising component attributed to mobile devices has seen as increasing over 10 percent quarter over quarter. Social media companies like Twitter and Facebook that rely on ad revenue plan on supercharging their revenue by supplement user generated content with content provided by partnerships with sporting associations.

In the same 2013 Nielsen report, despite smartphone usage overtaking the PC dominance, TV viewing was still ranked number one in hours per month a user spends on a particular device, with over half of US households owning more than 3 TV sets per household. However SmartTVs are IP-based to allow for streaming of “over-the-top” type applications. “Over-the-top” technologies allow TV users to bypass typical cable or broadcast providers by streaming video content through their internet connection through applications like Netflix or Hulu. This effectively cuts out cable TV providers (like Comcast and Time Warner) and upsets the tenuous balance in the universe of sports broadcasting.

As is well known, buying the rights to broadcast sporting events is by far the most expensive deals that network and cable TV channels make. Fox, CBS and NBC have contracts with the NFL extending to the 2022 season worth over $3 billion per season and ESPN is paying a hair shy of $2 billion per season for “Monday Night Football” through 2021. Recently CBS inked a 14 year, $10.8 billion deal with the NCAA for the rights to broadcast the Final Four. All of this means that cable providers have to bundle channels like ESPN and Fox Sports Network whose content is astronomically expensive with other networks to balance out the cost of buying the rights to provide consumers sports content. Basically, if all you watch on your cable subscription is Sportscenter be thankful for people that watch Honey Boo Boo for subsidizing your viewing habits.

What viewing sporting events “over-the-top” or on your mobile device through Facebook or YouTube does is throw a potential wrench into the mechanics of how lucrative these long-term deals will be. As viewership’s habits shift towards using “over-the-top” applications already embedded within SmartTVs or Set Top Boxes (STB) like AppleTV or FireTV, it in effect drive down advertisement revenue for the main broadcast on cable and/or broadcast television.

All of this adds up to a potential problem for the cost structure of the deals professional leagues and content providers currently have. The NFL and NBA have gone on record multiple times in the past few years stating their commitment to TV broadcasts as their primary means of distributing their content, but many of their moves are positioning themselves in preparation of cable viewers “debundling” their cable channels from large 200+ channel bundles currently sold to consumers to a segment of 10-20 channels each viewer demeans important. Some so called “cord-cutters” have gotten rid of their cable subscription all together had have opted to solely subscribe to streaming services such as Netflix and Hulu. Giving cable-cutters heart, there has been talk of Apple and Google each providing a “multichannel video package” (MCVP) through their individual STBs that would provide network content through the internet for a nominal subscription fee.

While the large professional sports associations have not fully committed to new digital media platforms for fear of harming their cash-cow deals with network television, other consortiums like the UFC have fully embraced social media marketing and video streaming as ways to reach their core (and often coveted) viewer: The Millennial. UFC fights were broadcasted for free via Facebook starting in 2012 and now can be found across multiple video streaming platforms. As conventional boxing continues to fall out of favor of younger generations, UFC looks to connect with a broad spectrum of viewers through a free content disrupting the current pay-per-view deals for billed fights.

User-generated live streaming services Meerkat and Periscope add another threat layer to the horizon for conventional video content deals. These services allow individual users to live stream video of events from their smartphones, relying heavily on targeted advertisements and heuristics gathered from viewers for revenue. Television set and STB manufacturers, like LG, Samsung and Vizio, have embedded TV viewership collection technologies. This viewership data tracking technology follows a viewer’s program and network preferences and combines it with demographic data such as age, gender and ethnicity to create ads that are more effective for a particular consumer segment. These practices also create huge privacy concerns — Would fans want the NFL to know your preferred beer or what type of deodorant you wear?

Nobody knows how we will be watching Super Bowl LIX in 2025, but we are seeing the twilight of the dominance of network television deals out of New York City and the dawn of a new age of sports video content with a new set of players out of Silicon Valley.